Table of Content

30 August 2011, Volume 19 Issue 4 Previous Issue    Next Issue

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Industry, Local and Market Information, Who Dominates Price Movement in Chinese Stock Market? ZHU Hong-quan, CHEN Lin, PAN Ning-ning 2011, 19 (4):  1-8.  Abstract ( 1887 )   PDF (1780KB) ( 954 )   Save This paper explores the relationship between stock returns and industry,local and market information in Chinese stock market.The results show that,though there is a significant comovement in the stock returns of firms headquartered in the same geographic area as that in US stock market,industry information dominates stock price movement and has incremental information content beyond local and market information.After controlling for industry and local information,there is no significant relationship between stock return and market information.Moreover,the industry comovement of stock return is stronger for firms in industries with higher competition.We argue that the price for mation in Chinese stock market has a significant industry component linked to the highly correlated fundamentals of firms within an industry. Related Articles | Metrics

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The Pricing of Real Option and Risk Hedging under Partial Information YANG Jin-qiang, YANG Zhao-jun 2011, 19 (4):  9-16.  Abstract ( 2164 )   PDF (1591KB) ( 1247 )   Save The current real option pricing theory is based on the full information.In this paper,we relax this assumption and consider the optimal control problem of investment and consumption during an infinite horizon to explore the consumption-utility based indifference price of real option with partial observation,which is known as partial information.Thanks to Kalman filtering,dynamic programming and Hamilton-Jacobi-Bellman theory,an implied option value is given by the semi-closed-form solution to the two free-boundary PDE under the separation principle of control system and the numerical results are obtained by the finite difference method.Further more,by Monte Carlo simulation,the difference of strat egies between partial information and full information is discussed.Finally,we explore the relation of the two value functions under partial and full observation,and the economic value of information is derived. Related Articles | Metrics

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Measurement of Operational Risk in Commercial Bank Based on Bayesian-Copula Method ZHOU Yan-ju, PENG Jun, WANG Zong-run 2011, 19 (4):  17-25.  Abstract ( 2216 )   PDF (1040KB) ( 1317 )   Save Based on the analysis of loss distribution approach,loss events are divided into three types:internal fraud,external fraud and illegal operation.Then,we apply two-stage distribution to fit the loss intensity distribution of operational risk and use Gibbs sampling of Bayesian theory to obtain the parameter estimates,which can reduce error caused by the insufficient low-frequency and high-loss data.In view of the correlation between different types of operational risk loss,the copula function is applied to integrate the total loss distribution.Finally,we calculate VaR and CVaR for different confidence level of the operational risk of commercial banks in China.The empirical result shows that:Parameter estimation based on Bayesian theory takes into accounta priori information such as population and sample information which can reduce the estimated error.The introduced copula function and measured value of VaR and CV aR not only consider the pro bability of loss events,but also can calculate potential losses of operational risk,so it can get a more accurate measurement result of operational risk. Related Articles | Metrics

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A Multi-Factor Affine Term Structure Model of Interest Rates for Pricing Treasury Bonds ZHOU Rong-xi, WANG Xiao-guang 2011, 19 (4):  26-30.  Abstract ( 2141 )   PDF (1445KB) ( 2381 )   Save The three-factor affine term structure models with square-root diffusion process are developed in this paper,and the Kalman filter method to estimate the parameters of the model is given.So the prices of treasury bonds are analyzed by Monte Carlo stimulation.The pricing results of Chinese treasury bonds are compared with Longstaff-Schwartz model,Vasicek model and Cox-Ingersoll-Ross model.The results show that multi-factor models are superior to the single factor,and the two-factor affine model has the higher precision than three factor model.It can provide the technology support for effectively pricing the treasury bonds in China. Related Articles | Metrics

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Volume-Price Relationship Analysis in Stock Market Under Assumptions on Market Participants’ Behaviors： Model and Empirical Tests ZHAI Ai-mei, ZHOU Tong 2011, 19 (4):  31-37.  Abstract ( 2114 )   PDF (2034KB) ( 1489 )   Save Based the assumptions on market participants irrationality and from the demand-supply perspective,the paper studies the volume-price relationship in stock market.Firstly the paper assumes that market participants are urge to win and delay to lose,and derives the demand curve and supply curve in the stock market through demand-supply analysis,then defined the initial equilibrium,and applies the comparative statics to study how new information arrival influences the initial equilibrium.It is found that volume and price change are positively correlated meanwhile volume and absolute price change are positively correlated.The paper finally run empirical tests based on the historical data in the Chinese A stock market,and the empirical conclusion support the theoretical conclusion. Related Articles | Metrics

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Pricing Model of Chinese Stock Market Based on Individual Investors’ Overconfidence CHEN Qi-an, GAO Guo-ting, CHEN Hui 2011, 19 (4):  38-46.  Abstract ( 2222 )   PDF (496KB) ( 1128 )   Save According to the actual situation in Chinese stock market,under the hypothesis condition that individual investors are overconfident and risk aversion and price-takers,this paper studies the effect mechanism of individual investors overconfident psychological preference on the price and its volatility of Chinese stock market by setting up an appropriate mathematical model theoretically.The research results show that the higher level of individual investors overconfidence would increase the volatility and expected price of stock market,and decrease the price quality of stock market and investors' total expected invest-ment income,while the higher level of individual investors' risk aversion and the more amount of average stock supply would decrease expected price of stock market and increase individual investors' total expected investment income.The above-mentioned conclusions,in a certain degree,can reasonably explain phenomena that price of Chinese stock market is up and down rapidly and significantly and fargreater than prices of stock markets in developed countries and regions,and the volatilitiy of Chinese stock market deviates from fundamentals of Chinese economic development seriously,and individual investors' total investment income of Chinese stock market is relatively low. Related Articles | Metrics

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Optimal Reinsurance-Investment Strategies in Incomplete Markets Under M-V and M-VaR Models WANG Hai-yan, PENG Da-heng 2011, 19 (4):  47-53.  Abstract ( 2084 )   PDF (319KB) ( 1115 )   Save This paper researches reinsurance-investment problem in incomplete markets.Under the assumptions that claim process of an insurance company follows diffusion process and the financial market is incomplete,by solving a quadratic optimization problem and a quadratic optimization dual problem with constraints,optimal constant rebalance strategies and corresponding effective frontier under mean-variance and mean-VaR models are obtained,respectively,for reinsurance-investment problem in Black-Scholes market with multiple risky assets.By comparing the results under mean-variance and mean- VaR models with each other,we find that the optimal const antrebalance strategies for two models are some multiples of a given commonfund,yet the optimal multiple for each model may not be identical; And the effective frontieres for two models are rays,yet the initial point and slope(risk price) of the rays may not be identical respectively. Related Articles | Metrics

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Research of Investment Strategy of Pension Fund Based on the Bayesian Stochastic Programming Approach HE Da-yi GAO Jian-wei 2011, 19 (4):  54-59.  Abstract ( 2131 )   PDF (1427KB) ( 1378 )   Save In this paper,according to the China pension fund situation,we develop the optimization dynamic investment strategy models based on the Bayesian stochastic programming approach,in which we improve the Bayesian vector autoregressive by using the Minnesota Prior.According to the improved model,we estimate the asset future returns and give the concreted calculation steps for solving the models.Finally and combining with the historical data,we conduct a simulation,the result shows that the optimal investment strategy can be solved according to the reality. Related Articles | Metrics

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The Impact of Exchange Rate on FDI： the Theory Analysis based on Real Option and Empirical Study in China PENG Hong-feng 2011, 19 (4):  60-67.  Abstract ( 2243 )   PDF (348KB) ( 1409 )   Save Based on the unique identity of Foreign Direct Investment(FDI) Options,this paper sets up a systematic model through the application of Real Option Theory's impacts on FDI,and theoretically tests the specific influences of RMB Exchange Rate,Exchange Rate expectations as well as Exchange Rate's volatility on China's absorption of FDI in the following content.On this basis,this paper proceeds with empirical analysis by employing Chinese data to further exam the conclusions generated from the model.Moreover,this paper divides the sample interval into two separate parts in the light of the signif icanteffect engendered by reform of RMB exchange rate formation mechanism on RMB Exchange Rate and Exchange Rate expectations.The empirical research of subsection samples reveals that Exchange Rate expectations have been the major factor affecting China's FDI before 2005 when the reform on RMB Exchange Rate is implemented.However,the impacts of RMB Real Effective Exchange Rate and its volatility on FDI are not obvious at all.In 2005,after the reform on RMB Exchange Rate,the expectations of Exchange Rate's impacts on FDI have become increasingly significant.RMB Real Effective Exchange Rate's impact on FDI has become conspicuous,while the volatility of RMB Real Effective Exchange Rate's influence on FDI in China is still insignificant.Based on these findings,some strategies are put forward. Related Articles | Metrics

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R&D Project Multi-Stage Evaluation Model Based on Real Option Under the Circumstance of Risks GU Xiao-yan, HE Feng, CAI Chen 2011, 19 (4):  68-75.  Abstract ( 2270 )   PDF (877KB) ( 981 )   Save R&D project investment decision is the key of R&D management in modern enterprises,and the reasonable and correct R&D project evaluation has great strategic and practical significance.In this paper,on the real option perspective,taking into account the flexibility of R&D project investment,combining the character of stages of R&D project,analyzing comprehensively market risk,technology risk and emergency risk during the lifetime,the multi-stage R&D project evaluation model is established under the circumstance of risks.Finally,through an example conducting horizontal comparison and sensitivity analysis,the correctness and reasonability of model are verified. Related Articles | Metrics

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Optimal Policies for Integrated Inventory in VMI-TPL Supply Chain with Determined Demand ZHENG Chang-zheng, LIU Zhi-xue, XU Bin-bin 2011, 19 (4):  76-83.  Abstract ( 2268 )   PDF (2134KB) ( 883 )   Save According to the problems arising in VMI implementation,a TPL is introduced into the VMI system to build an integrated inventory model in VMI-TPL supply chain with determined demand,which consists of a manufacturer,a TPL and multiple retailers.Raw materials and finished products are both considered in the model and the optimal production and inventory policies are derived.On this basis,the effect of various parameters such as production-demand ratio(p/d) on the costs of the supply chain is discussed and the optimal policy of integrated inventory model in VMI supply chain with TPL is compared with that without TPL Through the comparison,we observe that TPL can effectively reduce the total average cost of supply chain and avoid high inventory costs and high operational risk of the manufacturer.Furthermore,we show that production demand ratio(p/d) of the manufacturer affects the performance of VMI TPL supply chain greatly; and the higher the p/d is,the be ter performance the supply chain has. Related Articles | Metrics

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The Effect of Customer Loyalty on Profitability ZHANG De-peng, CHEN Shao-xia 2011, 19 (4):  84-92.  Abstract ( 2247 )   PDF (517KB) ( 1362 )   Save This article proposes a mathematical model to explore the relationship between customer loyalty and customer profitability deeply.By researching the function property of the mathematical model,it is demonstrated that the impact of customer loyalty on profitability is non-monotonic.Only if the cost of cultivating loyalty is fixed,profitability increases monotonically with the size of customer loyalty.Otherwise,there is a threshold which lets profitability increase with the size of customer loyalty when θ∈[0,θ*) and decrease when θ∈[θ*,1].In addition,the paper discusses how the cost rate of cultivating loyalty,purchase arrival rate and monetary at each time affect the size of θ*.Finally,some management suggestions are given according to the findings. Related Articles | Metrics

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Coordination Model of a Two-Echelon Supply Chain with Time-and Price-Sensitive Demand DONG Yu-fen, HE Ping, XU Xiao-yan 2011, 19 (4):  93-97.  Abstract ( 2099 )   PDF (2063KB) ( 927 )   Save The paper studies the decision problem of a two-echelon supply chain consisted of one supplier and one retailer under the situation of time-and price-sensitive demand,where the supplier decides the delivery time and the wholesale price,and the retailer decides the retail price.Through analyzing the decision process in decentralized mode and centralized mode,the formulations of the optimal decisions for two modes are presented.Moreover,a new combined contract is designed for the perfect coordination of the supply chain. Related Articles | Metrics

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A Study on Profit Distribution Model of General Contracting Construction Supply Chain ZHANG Yun, LÜ Ping, SONG Yin-qiu 2011, 19 (4):  98-104.  Abstract ( 2272 )   PDF (671KB) ( 1053 )   Save Profit distribution is one of the important issues of construction supply chain.On the background of contracting project market,this paper sets up the profit distribution model between the general contractor and subcontractor based on Revenue-Sharing theory and Stackelberg theory.Their optimal devotion levels for extra incentive bonus and the best appropriate distribution ratio are deduced through solving the model.Considering the capacity difference between the general contractor and subcontractor can influence the prof it distribution,it analyzes the profitfunction variation tendencies of the supply chain,general contract or and subcont ractor and the reasons of which,finally,it illust rates the application of the model with a case,and draws the functional images,which quantitively and intuitively confirm the conclusions proposed in the paper. Related Articles | Metrics

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The Coordinated Optimization on Berthing Containerships between the Dock and Pontoon in a Regional Hub Port JIN Zhi-Hong, QIU Bo 2011, 19 (4):  105-110.  Abstract ( 1925 )   PDF (937KB) ( 1251 )   Save The dock congestion has been becoming increasingly outstanding problem in a regional hub port,which results in the accessorial operational cost,especially for a feeder line shipping company.To reduce the waiting times in the hub and lower the operational cost,some feeder line container transportation companies try to set bulk barges,close to the hub port,as floating container terminal to berth smaller containerships.This paper proposes the coordinated optimization on berthing containerships between the main dock and pontoon in a regional hub port,from a view point of a feeder line shipping company.A coordinated berthing decision optimization model is proposed based on berth allocation problem and a modifiedge neticalg orithm is developed.The simulation tests quantitatively analyzes the countrmeasure against dock congestion and shows its effectiveness. Related Articles | Metrics

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Multi-Objective Intelligent Optimization Design Method for Multi-Platform Based Scaled-Based Product Family WANG Ke-xi, YUAN Ji-jun, HUANG Min-mei, CHEN Wei-min 2011, 19 (4):  111-119.  Abstract ( 2027 )   PDF (1465KB) ( 900 )   Save According to the characteristic and complexity of scale-based product family based on multi-platform,a two-level multi-objective concurrent collaborative optimization algorithm are presented to solve multi-platform based product family model during a single optimization process.The simulation experiment shows that the presented method in the case of unknown platform variables can simultaneously determine the optimal settings for the product platform and corresponding product family,by automatically varying the amount of plat form commonality within the scale-based product family. Related Articles | Metrics

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A Bi-Level Programming Model and Heuristics for P-Median Location Problem with R-Interdiction Worst Loss YANG Jun, LIU Shu-ji, WANG Ling 2011, 19 (4):  120-129.  Abstract ( 2091 )   PDF (1858KB) ( 1170 )   Save Vulnerability to sudden service disruption due to deliberate sabotage and terrorist attacks is one of the major threats for network system.Thus,facility location strategy in network should concern the operational cost in peacetime and emergency.This article focuses on how to locate P facilities so as to minimize expected cost including the regular operational cost as well as the emergent operational cost of a worst-case attack with the interdiction of R facilities.We have cast this problem as a bi-level binary programming model where the top level problem involves the decisions about where to locate facilities and the lower level problementails the interdictor response on which facilities to at tack.We solve the bi-level problem through hybrid genetic algorithm based on lagrange relax method.Results of this problem and traditional P-median location problem applied to European 150 data set are presented.Several solutions derived from these models are presented in greater detail and demonst rate the degree to which the loss of R facilities affects network system efficiencies with different location strategy decided by these models.Then we analyze the results to changes in key parameters including the weight of regular condition,the number of facilities and the number of facilities interdicted. Related Articles | Metrics

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Dynamic Decision Model of Collaboration Knowledge Creation in Enterprise Value Chain HONG Jiang-tao, HUANG Pei 2011, 19 (4):  130-136.  Abstract ( 2104 )   PDF (596KB) ( 1296 )   Save This paper discusses a decision-making problem of collaboration knowledge creation in enterprise value chain.It regards a manufacturing enterprise as a dominant one in value chain and it considers four different conditions based on inhomogeneous combinations by one dominant enterprise(which is generous or stingy type) and one collaborative enterprise(which is long-viewed type or short-viewed type).Then it uses differential game to analyze the dynamic decision-making process of collaboration knowledge creation in value chain.After comparing the results under the four conditions,it gets a Pareto optimal creative situation of collaboration knowledge and analyzes the corresponding constrains in the ideal Pareto optimal situation.Meanwhile it comes up with some suggestions to promote achieving the Pareto optimal value in knowledge collaboration mechanism.Finally,a numerical example is given to verify the results of the theoretical derivation. Related Articles | Metrics

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Time Varying Travelling Planning Problem for Maximal Utility LI Jin-hua 2011, 19 (4):  139-143.  Abstract ( 2088 )   PDF (1358KB) ( 813 )   Save The current researches on travelling planning problem hardly consider both utility and time varying.So this paper proposes a time varying travelling planning problem,which considers three constraints:(1) Node's residing time and edge's travelling time are time dependent in networks;(2) the traveller has different preference for each node;(3) The maximal travelling time is limited.The tavelling networks are represented by time aggregated graphs(TAG) firstly.Then,a mathmatical planning model for the problem is proposed,and a label method is designed.Finally,an example is demonst rated and the application is discussed.Compared to time expanded graph(TEG),the approach may has suboptimal solution,but it reduces the computational cost significantly. Related Articles | Metrics

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Unbiased GM(1, 1) Power Model and Its Application WANG Zheng-xin, DANG Yao-guo, LIAN Zheng-wei 2011, 19 (4):  144-151.  Abstract ( 2189 )   PDF (560KB) ( 1264 )   Save Based on the analysis of inherent errors in traditional GM(1,1) power model,this paper puts forward Unbiased GM(1,1) power model.It is theoretically proved that the complete coincidence of the prediction and simulation to the original data of its time response curve generated form has achieved.The unbiased model presented in this paper has completely eliminated the inherent simulant error of the traditional model,but also avoided the jumping errors from the differential equation to differential equation in traditional grey modeling.The application of this model covers unbiased GM(1,1) model and gray discrete model.Numerical simulation and case analysis shows that the simulation and prediction accuracy in traditional modeling has been significantlg improved by unbiased GM(1,1) power model. Related Articles | Metrics

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The Study of Pricing Mechanism For Short Life Cycle Product Under Strategic Consumer Behavior LIU Xiao-feng, XU Xian-hao 2011, 19 (4):  152-158.  Abstract ( 2141 )   PDF (1803KB) ( 1286 )   Save In this paper,we use Stachelberg game theory model to consider how a monopolistic firm of short life cycle product manages the revenue in the perspective of the strategic consumer behavior.The conclusion shows that the firm will leave a lot of money on the table if it ignores the consumer's strategic behavior.The firm should make the optimal price policy based on the inventory and consumers expectation.When the inventory is small,the firm can ignore the strategic consumer behavior and make a high price policy; When the inventory is relative large,the firms ptimal profit will be realized under the only rational equilibrium; when the inventory is enough,the firms optimal price policy is related with the consumers rational expectation and value discount.The firm can use suitable inventory controlling to enhance the risk of stock out,and avoid the adverse impact of the consumers strategic behavior.The conclusion is useful for the revenue management of the short life cycle product. Related Articles | Metrics

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Distribution of Relation Strength and Small World of Knowledge Flowing on Informal Knowledge Networks ZHANG Bing, WANG Wen-ping 2011, 19 (4):  159-166.  Abstract ( 1836 )   PDF (1936KB) ( 1121 )   Save Aiming at the phenomenon of small world of knowledge flowing on informal knowledge networks,using the method of MAS,building a knowledge flowing model based on the classic WS small world model,we studies the occurrence mechanism of the phenomenon.The results show that the exponential decay of relation strength is necessary for the phenomenon,the efficiency of knowledge flowing in the networks is seriously sensitive to the distribution of relation strength and the mean value of relation strength on networks will influence the evolutionary speed but notinfluence the evolutionary pattern. Related Articles | Metrics

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A Study on Driving Forces of China’s Industrial Structure Optimization under the Carbon-Intensity Abatement Objective CAI Sheng-hua, MOU Dun-guo, FANG Meng-xiang 2011, 19 (4):  167-173.  Abstract ( 2119 )   PDF (1521KB) ( 1138 )   Save This paper is based on two theoretical:one is industrial structure evolves endogenously and the other is that the evolution of consumption structure has regular relationship with families incomes.By empirically studying the pathway of some developed countries and analyzing the Input-output tables of China's economy,we analysis the impacts of consumption on industrial structure and forecast the evolution of industrial structure and the trend of CO2 intensity.The results show:(1) The consumption scale and its structure is one of the main driving forces for China's industrial structure upgrading.(2) In order for CO2 int ensity abatement,it is necessary to implement energy demand-side management and guide the people change to "low energy consumption,low carbon emission" life-style. Related Articles | Metrics

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Study on Supervision Mechanism in Emissions Trading System JIN Shuai, SHENG Zhao-han, DU Jian-guo 2011, 19 (4):  174-183.  Abstract ( 2250 )   PDF (1809KB) ( 1222 )   Save Effective supervision is the fundamental premise of emissions trading programs to exert advantages.In a two-stage dynamic game of regulator and polluting firms,the optimal supervision strategies to achieve a fixed aggregate emissions target cost-effectively in emissions trading system is studied,including supervision level,the aggregate supply of permits and penalty shape.Based on gaming analysis,a heterogeneous agent-based experiment platform for regional emissions trading system is established using computational experiment.Then further analysis are done from perspectives of dynamic and boundedrational.The results show that,the optimal strategy to achieve targetis to induce full compliance.This is not simply setting severe punishment,but seeking tradeoff between level of supervision and penalty.Finally,integrating the permitprice directly into the penalty shape allows the policy objective to be achieved more cost-effective. Related Articles | Metrics

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Spatial Distribution Analysis of Provincial Basic Research Based on Funded Projects from National Natural Science Foundation of China ZHANG Zong-yi, TANG Xian-ming, LIU Yin 2011, 19 (4):  184-192.  Abstract ( 1881 )   PDF (1781KB) ( 884 )   Save Based on panel data of General Program from the National Natural Science Foundation of China(1998-2010),this paper investigates the spatial distribution characteristic and predicts the distribution trends of the applying and funding activities of NSFC from the angle of space distance by employing spatial statistical methods.The results indicate that only the applying activities of NSFC have shown a significant space cluster effects currently,but the non-equilibrium distribution of basic research would change from multi point pattern to single point pattern around 2015,if research activities concent rate to the eastern coastal provinces sustainedly with the existing speed. Related Articles | Metrics